What is marketplace?

What is the best payment solution for an online marketplace without creating new merchant accounts for sellers while keeping the marketplace risk low?

• The customer must see the seller's business name in their statement and the marketplace wants to act as a middleman and take a cut of the transaction while avoiding payment aggregation and dealing with chargebacks. With Stripe connect, all the sellers will need a stripe account and these sellers already have a merchant account. With payments the marketplace would have to take on the risk of dealing with chargeback.

• Answer:

  I may be misunderstanding what you're asking, but I don't believe this is technically possible. I mean, there may be a way to do it, but it's going to make a ton of work for you. You can't simultaneously host merchant accounts on your marketplace AND not assume any of the risk. The way the most popular APIs are built is to give you two options: 1) Your marketplace can shoulder the burden of payouts, fraud, chargebacks, anti money laundering compliance, PCI compliance, etc. 2) or, you can partner with a payment processor that is the http://en.wikipedia.org/wiki/Atlas_(mythology) to your Earth. In the former scenario, you have a lot to worry about. A lot of it is legal compliance, but the hidden aspects are all of the operations you’ll have to manage that support the payment functions. You’ll have to plan how you’re going to build customer service, risk, compliance, and security teams as you grow. With every new user, that becomes more of a challenge. In the latter scenario, you won’t be able to control every last detail (and why would you want to after everything I just explained?), but the end-to-end experience can still be yours. I’m heavily in favor of the second option, but maybe that’s because I’ve seen teams build large marketplaces with little overhead on that model. A note on Chain Payments / App Fees These are commonly implemented on platforms that want to charge a fee for using the marketplace, such as a per transaction charge. In scenario one above, the fee would be taken out of the aggregated funds. In the second scenario, the processing partner takes the marketplace fee out of the transaction and sends it to the platform’s account. As noted, you could apply for an MSP or ASP with a bank, but yes, it's difficult. Here's just a taste: http://www.merchantuniversity.org/getting-started/what-is-an-iso-msp.aspx The registration process to become an ISO/MSP is rigorous and required the potential ISO/MSP to prove they are financially capable of performing the required duties. The documents applicants must submit with their application include: • Two years business financial statements or personal tax returns (last 2 tax years) for all principals • Personal financial statement for each principal • Executed Articles of Incorporation / Partnership documents • Detailed business plan • Copy of sales materials / solicitations • Complete list of current ISO employees / agents   Additionally, all principals have their credit history checked and evaluated to ensure that they are responsible with credit. It would appear to be so much easier to partner with a payment processor. Other clarifications: has the Payments as a Service (PaaS) model. Stripe has both Stripe payments (aggregation) and Stripe Connect (PaaS) now. Braintree has the aggregation model. Balanced has at least the aggregation model w/ escrow, too.